Paper tigers: RIM needs to figure out its corporate strategy

Mike Lazaridis and Jim Balsillie voluntarily stepped down as co-CEOs at BlackBerry smartphone maker Research In Motion Ltd. in January and hand-picked their own successor. However, the shake up has not resulted in the kind of radical overhaul to the company’s governance structure sought by activist investors. Both men continue to sit on RIM’s board of directors and Lazaridis is now vice-chair, a role that gives him direct contact with RIM’s new CEO Thorstein Heins. Similarly, a report released by a committee of independent RIM directors recommended the company should have an independent chair, but the report was released a week after the management changes.

However dramatic the recommendation to divide the dual roles may look on paper, the change doesn’t really address the Waterloo, Ont.-based technology giant’s strategic problems. Given the composition of the group, it’s not a stretch to question whether the review was sufficiently censorious. The terms of reference were confidential up until its release last month and while it’s a given that RIM’s more seasoned directors — David Kerr and Barbara Stymiest — would not sign off on any document unless it was thorough, extensive and detailed don’t always add up to critical, which is the vital component that makes introspective exercises such as these credible.

After all, the evaluation was foisted on RIM after the folks at Northwest & Ethical Investments LP used the heft of their 2.6% stake in the company to demand the separation of corporate governance’s version of church and state last July. To avoid a public confrontation at its annual general shareholders’ meeting, RIM offered to examine the board’s structure, the merits of a lead director and the “business necessity” for the co-CEOs to hold significant board titles.

Going into the review, RIM’s independent directors had been staunchly supportive of Lazaridis and Balsillie and continue to be despite a disturbing drop in profits during the past year, successive declining quarterly earnings, an evaporating share of the smartphone market, product delays and a precipitous drop in the company’s stock price. Furthermore, the two executives are the modern co-founders of the iconic brand — and they own 12% of RIM’s outstanding shares, making them the second- and thirdlargest shareholders in a company where no one owns more than 10% of the stock.

To be fair, there has been much debate in governance circles about whether splitting the positions of CEO and board chair actually improves corporate performance. The theory is that having the same CEO and chair concentrates too much power in the hands of one person. Separating the two roles changes the board leadership structure — and dynamic — and, more importantly, allows each to focus on different, but vital aspects of a company’s performance.

But the bigger issue for RIM’s board, which, unlike previous versions, is hardly a bunch of neophytes, is that the market has lost confidence in Balsillie and Lazaridis even though RIM still has virtually no debt, revenues are growing and it owns a bevy of valuable assets. If the money to be made from this once mighty Canadian global champion is in a takeover play, expending directors’ energy on deciding whether to separate the roles of CEO and chair may be moot. What RIM needs is a clear vision for the future and better execution on the strategy. If it takes two heads at the top to lead the way, so be it.